Q4 2023 SFR REIT Earnings: INVH, AMH, TCN
Analyzing Q4 2023 results from Invitation Homes (INVH), American Homes 4 Rent (AMH), and Tricon (TCN).
Executive Summary
Invitation Homes (NYSE: INVH), American Homes 4 Rent (NYSE: AMH), and Tricon (NYSE: TCN) have built a combined portfolio of 180,000+ single-family rental properties across the country.
While funds were able to grow annualized rent 10%+ during stretches of 2021, pricing power has diminished and is <5% these days. While blended rent growth has stayed flat or positive year-over-year, new lease rent growth has turned negative in markets like Phoenix and Jacksonville.
In January, Blackstone announced its intention to acquire Tricon for $3.5b.
Estimates for portfolio-wide new lease rent growth from SFR Analytics successfully projected negative directional quarter-over-quarter changes for all three funds. Detailed information about real-time data on listings price cuts and new lease rent growth trends for INVH, AMH, and TCN is available at the end of the article.
Introduction
Single-Family Rental (SFR) Real Estate Investment Trusts (REITs) have become a prominent player within residential real estate. Today, three publicly listed SFR REITs (Invitation Homes, American Homes 4 Rent, and Tricon Residential) own a combined 180k+ homes. All three were founded in 2012 and began acquiring properties in the early recovery period following the 2008 global financial crisis; Invitation Homes scaled most aggressively, buying ~40,000 homes in 2012-2013 alone.
The Sun Belt has been a popular acquisition target for these SFR REITs, offering attractive underlying population and employment growth paired with reasonably priced homes relative to prevailing rental yields. These days, acquisition pace has slowed with funds struggling to find properties that offer attractive yields, driven by fewer homeowners being willing to sell and larger holding costs associated with higher interest rates. However, demand for SFR units from renters remains strong, and market conditions have driven a rise in interest for built-to-rent (BTR) projects.
While portfolio-wide renewal rent growth held strong for all three funds at 6%+, new lease rent growth further softened quarter-over-quarter, turning negative in some markets like Phoenix and Jacksonville. Because deciding to move is a costly, high-friction experience for tenants, SFR REITs are able to deliver moderate renewal rent growth to existing occupants even if the surrounding market has softened. New lease rent growth, however, is a better indication of the prevailing market rent and is likely a leading indicator on future renewal growth potential; as existing lease rents become further decoupled from market rents, tenants have an increasing incentive to accept the difficulty of moving to capture a lower rent.
In January, Blackstone announced its intention to acquire Tricon for $3.5b (to read more about the details of the deal, read our analysis published the day of the announcement). For more background on the public listed SFR REITs, check out our breakdown from December.
Data Overview
At SFR Analytics, we leverage nationwide deed, assessor, and rental listing data to track the single family rental market. To generate this analysis, we’ve:
Identified and reconciled the entities that INVH, AMH, and TCN have purchased homes under.
Matched rental listing data to the underlying ownership information that links an entity to a fund.
Aggregated additional sources of data, like school ratings, to provide additional context about the neighborhoods where properties are held.
Note: A more detailed breakdown of data and methodology used is available at the bottom of the post.
Analysis & Results
Invitation Homes
Year over year, in Q4 2023, total revenues increased 7.7% to $624 million, and property operating and maintenance costs increased 9.0% to $229 million. In FY 2023, total revenues increased 8.7% to $2,432 million, and property operating and maintenance costs increased 12.0% to $880 million.
Same Store Average Occupancy was 97.1%, down 20 basis points year over year. In FY 2023, Same Store Average Occupancy was 97.4%, down 30 basis points year over year. Same Store renewal rent growth of 6.8% and flat Same Store new lease rent growth drove Same Store blended rent growth of 4.6%. In FY 2023, Same Store renewal rent growth of 7.0% and Same Store new lease rent growth of 4.5% drove Same Store blended rent growth of 6.3%.
Acquisitions by INVH and joint ventures totaled 460 homes for $159 million while dispositions totaled 398 homes for $146 million. In FY 2023, acquisitions by INVH and joint ventures totaled 3,221 homes for $1.17 billion while dispositions totaled 1,489 homes for $547 million.
American Homes 4 Rent
Rents and other single-family property revenues increased 7.3% year-over-year to $408.7 million for the fourth quarter of 2023. Core Net Operating Income (“Core NOI”) from Same-Home properties increased by 6.0% year-over-year for the fourth quarter of 2023.
Same-Home Average Occupied Days Percentage of 96.2% in the fourth quarter of 2023, while generating 4.5% rate growth on new leases and 6.2% rate growth on renewals, resulting in 5.7% blended rate growth.
Tricon
Same home NOI growth for the single-family rental portfolio in Q4 2023 was 6.2% year-over-year and same home NOI margin was 69.3%. Same home operating metrics remained consistently strong, including occupancy of 97.4%, annualized turnover of 14.8% and blended rent growth of 6.0% (comprised of new lease rent growth of 3.7% and renewal rent growth of 6.6%).
The Company acquired 264 homes during the quarter for a total acquisition cost of $75.6 million, and disposed of 135 non-core homes for total proceeds of $49.2 million. On January 19, 2024, the Company announced that it had entered into an agreement for Blackstone to acquire Tricon for $3.5b; the transaction is expected to close in the second quarter of 2024.
Geographic Distribution
INVH
INVH has built an 84,000+ home portfolio spanning the country, with major presence in the Southwest and Southeast. Invitation Homes owns the most homes by state in Florida, accounting for almost a third of its portfolio. After Florida, Georgia and California are the next largest states by holding, each having over 11,000 properties.
AMH
AMH has built a 58,000+ home portfolio. Compared to INVH, AMH has a larger presence in the Midwest, with almost 10% of the portfolio in Ohio and Indiana alone. American Homes 4 Rent has a more even distribution of properties owned by state with Texas, Florida, and North Carolina all having over 8,000 properties. AMH owns 6,670 properties in Georgia and a few thousand each in Tennessee, Arizona, Ohio, etc.
TCN
TCN has built a 38,000+ home portfolio, mostly concentrated in the Southeast. Outside of Indiana, where Tricon owns 1,800+ properties, Tricon doesn’t own any homes in the Midwest. Tricon owns most of its properties in Georgia, Texas, Florida, and North Carolina, with the four states accounting for almost 70% of the funds portfolio.
Purchase Price Distribution
School Ratings
Invitation Homes and American Homes 4 Rent have a higher median GreatSchools rating for schools near portfolio properties, slightly ahead of Tricon. Workforce housing providers like VineBrook and SFR3, which focus on affordability, have notably lower distributions of GreatSchools ratings.
Fund-Level Rent Growth and Listings Price Cuts
Property-level purchase and sale activity combined with rental listings history can be aggregated to create real-time estimates of new lease rent growth across the portfolios of SFR REITs.
At a high-level, the calculation is set up by looking at properties that have been listed and delisted two or more times since purchase and comparing the delisting price of the initial period on market to the subsequent period on market and annualizing the rate of change in price. Pairs of listings with a short duration between removal and relisting are excluded, as these are assumed not to reflect actual rental agreements.
Having access to this information in real-time is helpful for investors evaluating these companies ahead of quarterly earnings to get a sense for how new lease rent growth (and by extension, portfolio-wide rent growth) is tracking, a key KPI driving earnings or for SFR operators to see how their own portfolio is doing in comparison.
SFR Analytics has a track record of 0.95+ r-squared correlation for calculated figures compared to reported actual figures for new lease rent growth.
We provide rent growth metrics in real time across publicly traded and private SFR funds. If interested in getting this data, please reach out.
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